The shortfalls of third party certification schemes and possible remedies for stronger worker protection (part 2 of 2)

As consumers have grown more conscious of the human rights, labor and environmental impacts of their purchases, they have turned to third party certifications (i.e. the Fair Trade or Rainforest Alliance certifications) to distinguish how to ethically spend their money. In terms of human and labor rights, the proliferation of certification schemes is a helpful and welcome development to protect vulnerable workers in developing economies. Especially after news organization have exposed how slave labor, child labor, trafficking of undocumented migrants and debt bondage are rampant in the Thai seafood industry, these schemes may be a useful tool for corporations seeking to uphold human and labor rights in their supply chains.

Unfortunately, a litany of issues, including undue influence from corporate interests, economic pressures, lax enforcement, lack of financial independence, insufficient chain of custody procedures and ineffective auditing procedures, plague third party certification schemes, making them often inadequate in preventing the worst kinds of human rights abuses. In the second part of this two part series on human rights violations in global supply chains and the role that certification schemes can play in ensuring rights, we will discuss the criticisms and shortfalls of current schemes and how reforms can make these schemes more effective. This research and these recommendations derive from a project in the Spring 2016 Corporate Social Responsibility Clinic in partnership with the International Labor Rights Forum.

MAJOR CRITICISMS OF EXISTING THIRD PARTY CERTIFICATION SCHEMES

Although certification standards are formulated with multi-stakeholder engagement, they are often developed with significant influence from corporations that hope to use a given mark. The success of a particular certification depends on retailers and restaurants using the mark on its products. Certifications that require higher standards may result in greater costs to the corporation. If corporations cannot pass these costs onto their supplies, it’s less likely that they will seek to gain certifications. As a result, though many of the schemes purport to use existing International Labor Organization (ILO), Food and Agriculture Organization (FAO) and other international guidelines as a benchmark, many standards cherry-pick or water down the requirements due to business and financial pressures. Furthermore, standards are often silent on important labor rights issues that may not be enshrined in national laws or basic international human rights law. Some certifications only require applicants to honor national labor laws when it comes to critical areas of labor rights, such as daily hour requirements, freedom of association, minimum working age and the right to collective bargaining. This situation is exacerbated when the board of the certification has final say over what standards are selected from the recommendations of the formulation committee.

Certification schemes are also criticized because they do not impose binding obligations on their applicants, due to lax enforcement for non-compliance by the certification organizations themselves. This allows applicants to deviate from their obligations after receiving certification. Most certifications superficially provide for post-certification surveillance audits and heightened scrutiny in regards to complaints of non-compliance. They are also technically equipped to enforce their requirements through sanctions or removal of the right to use the mark. However, most of the certifications surveyed in our project do not provide public reports regarding enforcement or sanctioning, making it difficult to determine whether this occurs in practice. For example, a BAP certified shrimp-processing factory investigated by International Labor Rights Fund (ILRF) and Workers Watch United, revealed substantial human and labor rights violations. Unfortunately, after the investigation, BAP publicly announced that, despite some nonconformities, the factory retained its certification. This suggests that certifications may not completely serious about enforcing their requirements.

These enforcement issues might be related to the fact that certifications and certifying bodies are dependent on fees paid by corporations and applicants, including licensing fees for using the mark and payments for conducting audits. This dependency of certifications on licensing fees could create a conflict of interest between the certifications’ purpose of protecting against human and labor rights violations and their need to generate income to continue operating. This conflict of interest likely permeates the standard formulation process, the initial auditing process and the enforcement process, resulting in less protective standards, over-certification and lax enforcement. The independent auditing organizations themselves are not immune to this, as they are often for-profit organizations that rely on auditing costs for earnings, and are at the mercy of applicants, as many certifications allow applicants to choose their auditor.

Finally, certifications can be criticized for not imposing effective auditing procedures as a condition of certification. Applicants have an economic incentive to gain certification at the lowest cost to their business, preserving access to the market of developed countries with minimal effect on their profits. Despite this, many certifications do not require audit procedures that effectively prevent gaming and manipulation of the audit. For instance, many certifications schemes in our research provide for an initial announced audit and do not provide for random selection of interviewees, among other bare bones procedures. This gives the companies enough time to simulate the conditions required under the certification, resulting in less reliable audit reports and inhibiting the reliability of certifications as a control for human and labor rights risks.

STRENGTHEN EXISTING THIRD PARTY CERTIFICATION SCHEMES

Despite these criticisms, third party certification schemes still provide a feasible and beneficial private sector solution to labor and human rights violations in the seafood industry in developing countries such as Thailand. Much of the present criticism of these standards could be addressed by adopting changes in the organizational structure and procedures undertaken by certification schemes, including making the initial auditing process and the post-certification complaint and grievance process more rigorous and transparent.

During the initial auditing process, more rigor and transparency would help third party certification organizations police human rights violations, such as those discussed in the first part of this series. During the initial auditing process, more rigorous procedures would prevent applicants from gaming the system to achieve certification despite continuing abusive practices. This could include requiring auditors to conduct interviews of employees at random, select safety equipment at random and conduct interviews out of earshot of employers. These practices ensure that the interviewees and conditions of the audit are not prepared beforehand to simply meet standards. More transparency in audit requirements could also aid the non-governmental organization (NGO) community and the public in comparing certifications amongst one another and in effectively advocating for more rigorous procedures.

Certifications could institute more rigorous complaint mechanisms, which would allow the public to ensure that certified applicants continue compliance while giving workers and the public an effective way to voice complaints with confidence. Generally, complaints should trigger unannounced surveillance audits by the certification organization. However, this is not always the case, as shown by the BAP investigation discussed above. More rigorous complaint mechanisms and grievance procedures must be formulated to ensure that union representatives, interested NGOs or workers themselves have an effective outlet for reporting noncompliance. Transparency in this process, including, ideally, a way to see how many complaints have been lodged and their resolution, is essential for ensuring that all issues are promptly addressed. Moreover, a rigorous and transparent complaint mechanism could help prevent situations where certified companies reap the benefits of certification while still profiting from deplorable working conditions, and deter future non-compliance from others who would seek to do the same.

When it comes to the standard setting and auditing processes, including civil society in the process while separating business and financial interests from having final say on the standards is essential. These changes would result in more rigorous substantive standards with the ability to effect real change for workers. Involving NGOs, labor organizations, and other stakeholders more in the standard setting and standard review process would provide a more diverse and spirited discussion on which substantive requirements and procedures should be included by the certification. The separation of business and financial interests of the certification itself from the standard setting and auditing process would ensure that the economic interests of the certification do not impede its judgment. This could be achieved by delegating formulation of standards and auditing procedures to a truly independent committee with final authority within the certification and removing veto power from the main board that manages the other business and affairs of the certification. The independent committee should be comprised of all interested stakeholders, even members of the certification themselves. This would result in standards and procedures that are free from conflicts relating to the finances of the certification or its directors that may hinder the goal of providing a certification that maximizes benefits to at risk laborers.

Of course, the success of all of these reforms depend on the willingness of the certification to enforce its requirements. Thus, increasing enforcement sanctions and suspensions would give teeth to certifications, ensuring that noncompliant applicants suffer financially from deviating from requirements once they obligate themselves to meet them. Sanctions and suspension can be used as an initial deterrent, with revocation of the use of the mark as a final remedy for repeat offenders, cutting out the market for retailers and restaurants who require certification.

Finally, organizations should alter how certification schemes and auditors function financially by overcoming their dependence on licensing and audit fees from applicants. This change will promote impartiality and ensure that standards are formulated without economic incentives in mind. Although this is undoubtedly the hardest reform to achieve, certification organizations could seek out donations, grants or government funding focused on corporate social responsibility. Similarly, auditing bodies could reorganize as non-profit organizations, removing the self-interest motive from the initial audit and surveillance process. Furthermore, if certification organizations themselves assigned auditors to each applicant, rather than allowing applicants to choose, they would remove the incentive among auditors to relax their requirements for more business, removing the main influence behind the race to the bottom for auditing.

MOVING FORWARD

Multinational corporations must be held accountable for their global supply chains and how their products are produced. When governments fail to uphold basic labor and human rights standards, companies have an obligation to step in. For this reason, we applaud the creation of these schemes by the certification organizations and their proliferation through adoption and requirement by retailers and restaurants around the world. However, the work is not yet done. Third party certification schemes can benefit workers, companies and consumers if they are created and used in a responsible, accountable, and transparent fashion. We believe these recommendations, gleaned through our research in conjunction with the ILRF, provide a helpful starting point for creating an effective private sector response to the human and labor rights crisis in the global seafood supply chain. We hope that these recommendations spur further attention, reform, and response in this critical area. The lives and livelihoods of workers around the world may very well depend on it.

Sreelatha Babu is an LLM student at Fordham Law School. Denis Nolasco is a 2L at Fordham Law School. E. Constantinos Pappas is a 3L student at Fordham Law School. They all participated in the Spring 2016 Corporate Social Responsibility Clinic at the Leitner Center for International Law and Justice.

The views expressed in this post remain those of the individual authors and are not reflective of the official position of the Leitner Center for International Law and Justice, Fordham Law School, Fordham University or any other organization.

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The views expressed on this blog remain those of the individual authors and are not reflective of the official position of the Leitner Center for International Law and Justice, Fordham Law School or Fordham University.

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